A fellow blogger recently asked me what I felt to be the most valuable asset Millennials possess. He felt the answer was “time” and had an upcoming article to prove it. Compound interest is indeed wonderful. Albert Einstein call it the “eighth wonder of the world”. It brings logarithmic power to what our minds perceive to be a Cartesian world. My personal situation even provides a unique perspective on the importance of “time” and starting early. Although my wife earns 20-30% more than I do, my net worth is double hers thanks to an early start. I actually started a Roth IRA at age 16 (the first year I had earned income). Nevertheless, I responded back that actually “choice” can is even more important than “time” for Millenials (or anyone).
“Choice” is an important part of life, so important, in fact, that one really cannot exist without the other. Existing and living life means making almost constant choices. Whether someone realizes it or not (and a lot of people don’t), they are constantly making choices. Even someone who flees from choice by taking a passive stance, someone who always “goes with the flow”, exerts power on the flow of life around them. Indeed, if you are standing in a river, you are probably most worried about the water nearest you (is it fast/slow, cold/hot, clean/dirty) as opposed to the water on the opposite bank. If you watch the growth of ripples around you, the water nearest you is also the water most affected by your presence. No matter what, just by being in the water and floating along, you will create some ripples.
On the flip side, if you think you are not a go-with-the-flow person, and that you already realize you are making choices, then try (choose to try) to step back for a second and look for other choices. Look at events that just seem to occur in your daily life, activities that you might not be fully engaged with, and realize that those too are choices. Habits are choices. What choices have you unwittingly become conditioned to?
Understanding Choices and Consequences
At first, just try to find choices in your life. See them for what they are. Make the same choices you have always made, but try to engage yourself in them.Reflect on them afterward and try to find better choices. Obviously, some choices have a bigger impact on your life than others. I choose to get up go to work everyday, but I also choose to stay in the same career everyday.The bigger ones will dictate portions of the smaller ones. But the smaller ones also trickle up to the large ones. I have a habit of drinking once (sometimes more often) a week with friends. When I go out, I choose to invest in those personal relationships. I have already also chosen to head to work the next morning, but the consequences of the small choices out with friends can ripple up into poorer work performance. If I have a senior management review early in the morning, choosing that last beer can mean choosing to sleep in an extra ten minutes, which can mean choosing to drive instead of bike to work, which means choosing to be just a bit more irritable around my vice-president which means choosing poorer perception, even potentially a choosing a smaller raise at the end of the year.
The choices are almost never black-and-white, “all good vs. all bad”, “cake or death“. If they were, life would be much easier. Instead, they are convolutions of good and bad consequences. You can choose to get a highly-productive corporate job, and choose to have a tough manager and a great paycheck or choose a relaxed job environment and a lower paycheck. You can choose a job where you have high expectations but lots of freedom in how you work, or a job with low expectations and very little control of how you execute the tasks. You may not realize all of the consequences, but when you choose a job (or make any choice), all of the consequences, both good and bad will result.
Leverage Understanding to Own the Choice
A lot of people use the adage “If you don’t manage life, life will manage you.” While this is an absolutely true phenomenon, it derives from the reality that many people make choices and then try to ignore part or all of the ensuing consequences. As the VP example above tries to point out, making choices today will have a multitude of consequences in the future. It’s important to realize that the person you are today, and the shape of your life today, is a consequence of choices you’ve made over many years throughout your life. People who have the vision and awareness to see their choices and consequences can then manage those choices and better align their lives with their own values and desires. A person who ignores these choices (intentionally or unwittingly) will face consequences unprepared. They will feel like life is not in their control. They will have chosen to give themselves fewer better choices in the future.
The Personal Finance
Choice What does all this mean for your finances? Every dollar you have is a choice. The state of your personal finances is a cumulative result of your choices. Your dollars are a result of your hard work. Do you choose to work up to your full potential? Do you choose to grow yourself toward that full potential? Do you readily trade your own hard work for the the product of others’ hard work? Do you consume more or less product than you create? It’s important to remember that you have full control of your money and your time. If you choose to spend today, you are choosing to work tomorrow. If you choose to spend a lot today, you are choosing to work next year (and maybe the years after). You are not just choosing today, but you are choosing tomorrow.
Regardless of where you are today or how you got there, the great thing about life is that every day presents a new set of choices. You can’t change past decisions, you can’t change where you woke up today, but you can use today’s decisions to change tomorrow. Not everything will be in your control every day, but focus on what IS in your control, what decisions you discover you DO have. Whatever your situation, own the result and own the decision. Over time, you will be surprised to find how much of life you do control and how much of life is your own perception. This is your life, control it, make it your own. Use every day to make every tomorrow one step better.
*Yes, none of these are exactly compound interest or debt equations, but it was easier to linearize the functions than linearize the coordinate system.